Research
tells us the easiest sale to make is to get your current customers to buy more;
and it's less expensive to keep the customers you have than it is to get new
ones.
Like
many people I belong to several rewards programs, one of which is Staples. Staples has reduced their rewards
significantly since I joined. Duane
Reade has too, especially since they were bought by Walgreens.
The
reduction in rewards from Duane Reade, which effectively translated into a
price increase, was directly responsible for my moving most of my purchases to
jet.com.
As for
Staples, while I maintain my membership I have shifted many purchases to lower
cost suppliers for the same reason. But
I do still recycle my ink there so I get a coupon from time to time.
A few
months ago, Staples combined two of my coupons in one email and led with the
newest one. As a result I missed the
fact that the bigger coupon was expiring earlier, and had no opportunity to use
it.
It may
have only been for $8, but it made me mad.
I know that it's not a lot of money in the scheme of things. But it was enough that loss aversion set
in. So a gesture that was supposed to
make me feel good about being a customer instead made me angry.
But it
also made me wonder. Why do loyalty
coupons even have expiration dates? If
someone is a loyal customer why would a company care when they used their
rewards, just as long as they did?
In August
United Airlines announced that they would no longer impose a deadline to redeem
frequent flier miles. They join Delta
and JetBlue. But American Airlines is
still requiring customers to earn or redeem miles every 18 months. (Gazdik, 2019)
So,
what do you think? Why do companies do
this? Have you experienced the
frustration of expiring rewards? How does
it make you feel about the company? Have
you shared your feelings with others? Have
you shifted your purchase patterns as a result?
Will you now favor United and Jet Blue over American?
Gazdik,
T. (2019, August 29) United Airlines
Loyalty Miles Will No Longer Expire. mediapost.com. Retrieved October 8, 2019, from https://www.mediapost.com/publications/article/339941/united-airlines-loyalty-miles-will-no-longer-expir.html
8 comments:
I have a different view for loyalty program. I am personally a frequent traveler which means I have lots of hotel and airline rewards accounts. Actually the announcements of United Airlines eliminated their expiration date is bad news, it will reduce the value of each point/mile due to the never expire. Earlier this year, United Airlines changed their award system shifted from rewards charts to the dynamic miles which will live on November 15, 2019.(Honig 2019) In fact, the rewards charts will be a nice tool for members to maximize their rewards value in the peak season. Therefore, the United Airlines are devaluing their loyalty program system.
In my opinion, the affections of this change is depending on the specific users. In general, people do not need to worry about using their rewards in a set time frame in this new system. However, I am an active user who monitor the rewards associated information on a daily basis. Previously, the company need to use the expiration date to take back the millions of dollars’ worth of unredeemed miles/points to decrease their loyalty program budget.
I think more and more companies will join the playground of never expire reward system. It is the trend because it will give both companies and users an easier manner to use the rewards. I am a comprehensive experience customer, so I have not yet shifted my purchase behavior due to the change of rewards. For example, although Uber has its own member status benefit, I still prefer use Juno because of the competitive price. Back to the airline situation, the most affordable class for United Airlines charge carry-on bags and advance seat selections while Jet Blue and American Airlines offer these complimentary amenities. Therefore, the reward system is not the key element for making the decision.
Honig, Zach. “United Announces Heartbreaking Award-Travel Changes.” The Points Guy, The Points Guy, 5 Apr. 2019, https://thepointsguy.com/news/united-pulling-award-chart/.
There is some truth to the policy of setting a validity period on a customer loyalty program. I think there are three incentives for the point about the expiration policy. First, the expiration policy can drive the activity. Second, the expiration policy can filter the target active users and reduce user maintenance costs. Third, the point expiration policy can also reduce financial pressure. The specific expiration date should be formulated by the company's finances. According to different accounting standards and the company's operating conditions, a stable situation will be established to ensure that financial difficulties will not be realized due to a large number of points redeemed in the same period.
I used to be a member of Alaska and have nearly 40,000 points, but because there is no flight plan for a long time, the points are also shelved. Although I feel pity, I still understand the rules of the airline. I have also discussed this experience with my friends, but I have not changed my purchase plan. The reason is that I value the comfort of the flight rather than the preferential policy. For example, there is fast wifi on JetBlue, and the first class of JetBlue can lie completely, so even if I lose some discounts, I will choose the air that I like and the more comfortable one.
Huiwen Xu
Loyalty programs is a great way for companies to keep their customers engaged. Loyalty programs is in a way, a sort of customer retention tactic. It pushes customers to buy and to buy faster, hence the expiration date. I personally tend to either forget or not care about those programs. On the top of my head, (apart from airlines) I wouldn't be able to tell you what loyalty programs I am a part of. Being part of an airline's loyalty program can be very useful. It can allow you to carry one extra piece of luggage and/or carry more weights in your luggages. I remember two years ago, towards the end of the year, I was 75 Miles short for my statue to be maintained. I didn't have any travel plans before the following year and if I didn't travel before the year ended, I was going to be retrograded. Being in Paris at the time, I did organize a small weekend in Switzerland before the year ended so I could maintain my status. This is I believe the only time where I felt succumbed to the a loyalty program's ultimatum.
On the other hand, I know plenty of companies (non loyalty programs) that pushes you to buy. For example, this company called Viagogo is great if you are looking for last minute concert/show tickets. That being said, Viagogo uses a lot of unethical maneuvers to make you buy. As soon as you click on an event, it puts you on a very quick (30 seconds) yet nonexistent waiting line. As soon as you scroll down and hover over the available tickets for the event, some of them fade away with the mention "just sold" to urge you to buy before all the tickets sell out (which they never do). Apart for the timer that indicates you have 10 minutes to purchase your tickets once you have selected them (as they're holding them for you) if you stay too much inactive on the website, it sends you a notification such as "Hurry up, there's only a few tickets left". Such practices really makes me uncomfortable and I try to avoid going on those kind of websites unless it's necessary.
Allan C.
Emma Wang
I think companies apply the expiration date on their loyalty coupons because of different reasons. Firstly, I think they do this as a marketing strategy in the sense that customers keep their brand in the top of their mind. This increases brand awareness especially when the customer realizes that the expiration date is near. This increases the chances of customer redeeming their points before deadline plus also the likelihood of making other purchases in the same company. Secondly, the expiration date on coupons increases sales in a short amount of time and encourages customers to make larger purchases so as to gain more points. Without an expiration date, customers would not have the urgency to purchase much more than they need to. I have experienced the frustration of expiring rewards especially when I have forgotten about the dates and was informed by the cashier in a store full of people. This frustration makes me feel like it is putting unnecessary pressure on my purchases and the feeling of disappointment as well is inevitable. I have shared these frustrations with my friends and close family and I often get similar experiences from others as well. I will now favor United and Jet Blue over American because of their decision to remove the expiration dates as I am not a frequent flier.
LH
I think companies put expiration dates on their loyalty coupons to incentivize people to make purchases within a given time frame. Cialdini’s principle of influence, scarcity, comes to mind. Companies probably want to meet a quota before a specific deadline, so they try to influence us by making us believe we need to use our given rewards before time is up or we’ll lose out on saving money, which means we’ll end up losing money overall and no one likes to lose. I have experienced the frustration of expiring rewards, but only when the time comes for me to replace something and I realize my coupon has expired and I am now stuck paying full price. We often forget about coupons/rewards until we need the product on which they can be used; expiring rewards make us more likely to remember to use them and quickly… I feel that they may even influence us to make impulse purchases just for the sake of saving money we didn’t need to spend in the first place. This tactic doesn’t necessarily give me negative feelings towards the companies that use it, because “business is business,” but I would be more partial to similar companies that don’t use it than those that do. I have shared my feelings about this tactic with others on a surface level by saying things like, “Aww, man. My coupon expired!” or “I could’ve saved x amount of dollars had I remembered to use my coupon.” When I have a coupon or rewards with an expiration date, I try to think if it can be used on a product I use/replace often; if it is, I try to make sure I use the coupon or rewards before the expiration date even if I don’t need the product to be replaced at the moment, because I know I’m saving myself a few future dollars. If I don’t need anything covered by the coupon/rewards, I don’t really care too much about using or missing out on it/them. If I traveled more frequently than I do now, I would favor United and Jet Blue over American, because I would accumulate enough points to matter and would not want to lose out on using them. I don’t travel often, so I don’t have many points, in turn, I don’t stand to lose much of anything… no need to switch airlines. If that same question were posed based on a clothing or beauty store I frequent, my answer would be the opposite.
Yin Lei
I think the reason why loyalty program rewards come with an expiration date is that they hope customers can make a consumption more frequently. I often experience this same situation, when I realize that I have some special rewards or coupons, they already expired. Then I feel frustrated. However, I won't complain about the company since they already provide me with some benefits. It was me, who forgot their special rewards. By thinking about this point, I feel like just because those companies don't want their customers to forget them, they make an expiration date on it to remind the customers to shop quickly.
I am a customer who don't pay much attention to loyalty programs, since I usually have different choices based on different situations and those requirements for keeping memberships in a loyalty program are too annoying. I prefer the current policy that United and Jet Blue decide because it makes me feel more comfortable and reasonable. As a result, I might join their loyalty program.
One of the most prominent reasons companies have used an expiration date for rewards points is due to the fact that it makes the accounting process easier. I recently learned that when rewards points are issued it shows as a liability on the companies balance sheet and then the company must set aside money in case those reward points are used. If the reward points are never used and can never expire then the money is sitting there and cannot be used. It is a waste of money and resources. By providing an expiration date, the company ensures that the points will either be used or they can return the money they set aside after they expire. Additionally, it acts as an incentive for the consumer to return to their store sooner and hopefully make more impulse purchases as they do not want their points to expire. Consciously expiring points look as though the consumer is loosing money but in reality, it is a sunk cost that cannot be recovered. Personally, I see the benefits to companies enforcing an expiration date and therefore it does not influence my purchasing decisions.
By giving an expiration date on loyalty programs it forces the customer to purchase sooner rather than later. It gives the customer a specific window to purchase an item with a discount to build loyalty with the company. I also think that from buying quicker the company is able to analyze the person's shopping habits and can use that to their advantage when their next sale or deal occurs. When you spend during when you are on a loyalty program you more likely making bigger purchases. This also builds a rapport from company to consumer.
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